Rent vs Buy Calculator
Compare the true net worth outcomes of buying a home versus renting and investing the down payment in index funds — incorporating taxes, appreciation, maintenance, and transaction costs.
Methodology and AI Summary
Global Finance Calculator computes accurate financial projections based on updated localized rules. The calculator does not store data on our servers and processes all parameters locally for strict privacy.
$44,130.80
Buying generates higher net equity than renting and compounding your down payment.
$265,220.54
Equity minus sales costs$221,089.74
Invested portfolio$3,137.41
P&I + taxes + HOA$2,200.00
Year 1 monthly rentCalculation is instantly saved in this shareable URL.
🗄️ Saved Comparison Scenarios (Side-by-Side)
Net Worth Trajectory Over Time
Year-by-Year Financial Progression
Tracking home appreciation, declining mortgage balance, buyer equity, and renter investment compounding.
| Year | Property Value | Mortgage Debt | Buyer Net Worth | Renter Net Worth | Net Advantage |
|---|---|---|---|---|---|
| Yr 1 | $463,500.00 | $355,781.56 | $79,908.44 | $111,422.86 | $-31,514.42 |
| Yr 2 | $477,405.00 | $351,291.79 | $97,468.91 | $123,859.12 | $-26,390.21 |
| Yr 3 | $491,727.15 | $346,513.21 | $115,710.31 | $136,289.15 | $-20,578.84 |
| Yr 4 | $506,478.96 | $341,427.30 | $134,662.93 | $148,691.60 | $-14,028.67 |
| Yr 5 | $521,673.33 | $336,014.23 | $154,358.70 | $161,043.32 | $-6,684.61 |
| Yr 6 | $537,323.53 | $330,252.98 | $174,831.14 | $173,319.25 | +$1,511.89 |
| Yr 7 | $553,443.24 | $324,121.15 | $196,115.50 | $185,492.31 | +$10,623.19 |
| Yr 8 | $570,046.54 | $317,594.92 | $218,248.82 | $197,533.20 | +$20,715.63 |
| Yr 9 | $587,147.93 | $310,648.90 | $241,270.16 | $209,410.35 | +$31,859.81 |
| Yr 10 | $604,762.37 | $303,256.09 | $265,220.54 | $221,089.74 | +$44,130.80 |
Rent vs Buy: The Real Math Behind Housing Decisions
The conventional wisdom that "renting is throwing money away" ignores the unrecoverable friction costs of homeownership. Both renting and buying involve unrecoverable expenses: renters pay landlord rent, while homeowners pay property taxes, mortgage interest, homeowner insurance, HOA dues, maintenance, and steep selling agent commissions.
1. Opportunity Cost of Equity
Tying up $100,000 in home equity forfeits the compounded return of a broad market index fund (historically 7% to 10% annualized). In high-interest rate environments, the opportunity cost of down payment capital often exceeds housing price appreciation.
2. Transaction Frictions
Buying a home incurs 2% to 4% in closing fees (stamp duty, transfer tax, title insurance, loan origination). Selling incurs 5% to 7% in broker commissions and title transfer costs. If you relocate in under 5 to 7 years, transaction fees almost always wipe out built-up equity.
3. The 1% Maintenance Rule
Properties depreciate physically while land appreciates. Roof replacements, HVAC repairs, plumbing, and structural maintenance cost an average of 1% to 1.5% of the property value annually — expenses that renters never absorb.
Calculation Methodology & Proof
Rent vs buy
Both paths start with the same cash. The buyer puts it into the house; the renter invests it. Each year we compare net worth.
- Buyer cash outlay: down payment + buy closing, then PITI + maintenance each month.
- A simplified tax deduction reduces buyer cost by interest × marginal rate.
- Renter pays rent (growing) and renter insurance, and keeps the invested stake growing.
- Break-even is the first year buyer net worth exceeds renter net worth.
Important Caveats & Planning Assumptions
- Appreciation, returns, and rent growth are assumptions, not forecasts.
- Transaction costs and taxes on sale are stylized.
Frequently Asked Questions
Expert answers to common questions
Why can renting win on paper?
If the down payment would earn a high return, if you move before break-even, or if buy costs (tax, maintenance, selling costs) are high relative to rent.
Do you include the mortgage interest deduction?
A simplified deduction using your marginal tax rate is applied to interest. Caps, standard-deduction effects, and local tax treatment are not fully modelled.
What is 'advantage'?
Buyer net worth (home equity after selling costs) minus renter net worth (invested cash). Positive means buying is ahead in that year.